Reclaiming financial privacy with digital currencies

Jonathan Stacke over at The Genesis Block has a fine op-ed on financial privacy to commemorate September 11.

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Jonathan Stacke over at The Genesis Block has a fine op-ed on financial privacy to commemorate September 11.

The big takeaway is that Bitcoins provide a mechanism for Americans to take back the financial privacy that they have lost step by step before and since September 11, 2001.

He first points out that modern financial privacy is rooted in the Bank Secrecy Act of 1970, which Congress passed to keep tabs on possible money laundering. Six years later, the Supreme Court ruled bank records were not protected by the Fourth Amendment’s protection from unreasonable search or seizure.

In 1978, as a response, Congress passed the Right to Financial Privacy Act, but the PATRIOT ACT — passed in response to the 9/11 attacks — eroded many of its provisions.

Since then, privacy has eroded rapidly. The NSA leaks from Edward Snowden confirm the degree to which this has happened, without our consent.

Further examples of privacy erosions mentioned include reporting requirements on cash transactions of $10,000 and national security letters, the content of which recipients are even prohibited from disclosing.

Stacke sums up the threat nicely: “Risk from terrorist activity can never be fully eliminated, yet civil liberties are finite. If we let them chase each other perpetually downwards, there’s only one possible end scenario.”

So, where does Bitcoin come in?

First, the fact that Bitcoin and other digital currencies allow their holders to store them securely anywhere, offline or in other denominations, individuals are thus free to secure their own property.

This has important legal ramifications in the US because the Court’s ruling regarding bank information disclosure hinges on the fact that the government is not prohibited from obtaining information revealed to a third party.

It’s not up to third parties to store wealth with Bitcoin. The individual has that right and obligation.

To tack on to Stacke’s analysis, it’s worth noting that the anonymity afforded in transacting digital currencies makes their seizure that much harder, too. Stacking a logistical protection on top of a possibly legal one only adds to Bitcoin security.